Temperatures aren’t the only thing on the rise this summer. So is lifestyle creep, advisors say.

As a client’s income increases through job changes, promotions or bonuses, savings often get left behind, competing with desired discretionary items.

Take vacation budgets. According to a recent survey from Bank of Montreal, 62 per cent of Canadians plan to spend the same or more on summer travel this year compared with 2024. Others plan similar splurges on things such as weddings, graduations, home renovations and family activities.

Mitchell Shields, founder and certified financial planner (CFP) at Still Water Financial Partners in Huntsville, Ont., notices lifestyle creep among clients whose salaries increase significantly – from $150,000 to $300,000, for example.

In the client’s mind, a bump in income allows for more exotic vacations, luxury vehicles, private school for their children or a larger home in a more desirable neighbourhood. “It’s easy to fill up that [extra income] with lifestyle wants,” he says.

The problem in a lot of cases is that the level of savings remains the same (as though they’re still earning $150,000). Clients fail to keep in mind that as they earn more, they must save more to maintain their new lifestyle in retirement, Mr. Shields says.

When he speaks with clients about this issue, many state their intention to beef up their savings once their mortgage or the kids’ schooling is paid off. But often other bills come up, pushing the savings goal further down the road.

To avoid these scenarios, Mr. Shields has in-depth conversations with clients about their values to understand their emotional ties to how they spend money. While it’s important to ask clients for bank and credit card statements, he notes that for clients, it can be a stressful experience.

“It’s easier to get people to stay where they are or step forward more responsibly than it is to try and say, ‘What are we going to cut back on?’” he explains. “It’s harder to get financially naked, look at a statement and figure out where money is going. It’s a mentally taxing exercise.”

The idea is to get clients thinking about responsible spending. He advises them to have a pre-defined set of rules, such as allocating a percentage of every new dollar they weren’t expecting toward their savings.

“It’s building the logic system before the emotions can play in,” he says.

Anna Golan-Reznick, CFP at Objective Financial Partners Inc. in London, Ont., has noticed lifestyle creep with some clients who move abroad either temporarily or during retirement. She says many believe moving to a cheaper country equals a lower cost of living and more for them to spend.

Many of her clients actually end up spending more on things like travel, dining out, and local activities after moving abroad—even if individual costs are lower.

“The increased frequency and variety of experiences often lead to higher overall spending,” she says. “They may have a budget, but the temptation is much greater when they get there due to the experiences.”

To help with this, she has started adding 20 to 25 per cent more to their budget for emergencies and unexpected expenses.

Many fail to grasp foreign currency conversions and therefore underestimate the true cost of items, causing budget strain.

“When you don’t factor in currency, it’s harder to track expenses and [they can] lose sight of the budget,” she says.

Kelly Ho, CFP at DLD Financial Group Ltd. in Vancouver, says while she’s aware of her clients’ cash flow needs, she has noticed slight differences between what clients say and think they are doing with their money.

Clients will later admit they “stretched” when travelling and “living life,” going over budget. While most of her clients are debt-free and can pay for things without difficulty, Ms. Ho says these situations ultimately lead to clients failing to save more.

“Many are proactive about savings, but a lot aren’t, and they blame it on life being more expensive,” she notes. “But as life gets more expensive, they’re spending more. Our savings are not creeping up the same way as [they] should compared with our lifestyle. So, there’s a gap.”

Ms. Ho doesn’t want to lecture clients about the importance of saving more, as their reaction might be defensive. Instead, she prefers a data-driven approach in which clients fill out a cash-flow worksheet each time they do a comprehensive financial review with her.

“That way, I know where the money is going,” she says.

Ms. Ho challenges her clients to follow the financial planning standard of increasing savings each year according to the rate of inflation. She shows them the difference in their retirement income projection with and without inflating their savings.

“This very minor adjustment can make a significant impact in the long term,” she says.

DEANNE GAGE –  THE GLOBE AND MAIL
PUBLISHED JULY 8, 2025